Defendants allegedly conspired to send millions of dollars worth of trade secrets to undercover law enforcement officers posing as potential customers
New York—A complaint was unsealed last week in federal court in Brooklyn, N.Y., charging Klaus Pflugbeil, a resident China and Canadian national, and Yilong Shao, a Chinese national, with conspiring to send trade secrets that belonged to a leading U.S.-based electric vehicle company. The United States Attorney for the Eastern District of New York did not name the OEM.
Pflugbeil and Shao are operators of a China-based business that sold technology used for the manufacture of batteries, including batteries used in electric vehicles. The defendants built the company using the OEM’s sensitive and proprietary information, and marketed their business as a replacement for EV manufacturer’s products.
Pflugbeil was arrested the morning of March 19 after he sent multiple OEM trade secrets to an undercover agent and traveled to Nassau County for a meeting with what he believed to be Long Island-based businesspeople, who in reality were undercover law enforcement agents. Pflugbeil was scheduled to make his initial appearance before United States Magistrate Judge Peggy Kuo. His co-defendant Shao remains at large.
Breon Peace, United States Attorney for the Eastern District of New York, Matthew G. Olsen, Assistant Attorney General of the Justice Department’s National Security Division, and James Smith, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the arrest and charge.
“As alleged, the defendants set up a company in China, blatantly stole trade secrets from an American company that are important to manufacturing electric vehicles, and which cost many millions of dollars in research and development, and sold products developed with the stolen trade secrets,” stated United States Attorney Breon Peace. “Rather than invest their own resources into competitive technology, the defendants looted [the OEM’s] trade secrets for their own financial gain.
“The defendants stand accused of stealing valuable proprietary technology from a U.S. electric car manufacturer and using it to set up a rival business overseas,” stated Assistant Attorney General Matthew G. Olsen. “This blatant theft of advanced trade secrets relating to battery components and assembly blunts America’s technological edge, and the Justice Department will hold accountable those who would so try cheat our country of its economic potential and threaten our national security.”
The OEM is a U.S.-based leading manufacturer of battery-powered electric vehicles and battery energy systems. In 2019, the automaker acquired a Canada-based manufacturer of automated, precision dispensing pumps and battery assembly lines. Prior to its purchase by the OEM, the Canadian manufacturer sold battery assembly lines to customers who manufactured alkaline and lithium-ion batteries for consumer use.
The battery assembly lines contained or utilized a proprietary technology now owned by the automaker: continuous motion battery assembly. The proprietary technology provided a substantial competitive advantage to the automaker in the battery manufacturing process. The OEM spent at least $13 million developing the battery assembly trade secret.
Both Pflugbeil and Shao are former employees of the Canadian manufacturer. The evidence reveals that, by no later than 2019, Pflugbeil and Shao planned to make use of the automaker’s trade secrets for their own business activities.
For example, between October and November 2019, Pflugbeil and Shao discussed “set[ting] up” a company in Canada and China that would rely on the sensitive and confidential information needed to make and sell their own battery technology. Pflugbeil told Shao that he had “a lot of original documents” related to the technology, and sought out more “original drawings” from the automaker that they could copy for their planned business. Shao subsequently confirmed that “we have all of original assembly drawings by PDF.”
In or about July 2020, Pflugbeil and Shao opened their company, which has since expanded to locations in China, Canada, Germany and Brazil. The business makes the same precision dispensing pumps and battery assembly lines that the OEM manufactured using its proprietary technology. Their company is marketed by Pflugbeil as an alternative source for the sale of products that rely upon the automaker’s trade secrets, publishing online advertisements that state, for example, “Are you looking for [the OEM’s] Metering pumps and spare parts? Look no further.”
In operating Business-1, Pflugbeil and Shao relied upon the battery assembly trade secret. For example, in September 2020, Pflugbeil emailed a series of drawings to a gears manufacturer in order to produce several parts, and wrote “please keep the attached information confidential.”
The attachment contained drawings belonging to the OEM related to the battery assembly trade secret. The drawings that Pflugbeil sent were identical to the automaker’s drawings, except the name of the company was changed, the date of the drawing was changed, and the drawing identifying number was written in reverse of automaker’s drawing identifying number.
On or about Sept. 11, 2023, undercover agents attended a trade show for the packaging and processing industries in Las Vegas. The undercover agents posed as businesspeople who were interested in purchasing a battery assembly line from the company to manufacture batteries at a facility on Long Island.
The undercover agents were introduced to Shao at the trade show and later to Pflugbeil via email. Subsequently, on or about Nov. 17, 2023, Pflugbeil sent, via email, a detailed 66-page technical documentation proposal to an undercover agent while the agent was in the Eastern District of New York.
The proposal notes, “this technical documentation package contains [the company’s] proprietary information which must be kept confidential.” In reality, the proposal contained battery assembly trade secret information belonging to the automaker. If convicted, Pflugbeil faces up to 10 years in prison.
Comments are closed.